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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






2. The most desirable alternative given up as the result of a decision






3. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






4. Ed = 8 - infinite change in demand to price change






5. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






6. The marginal utility from consumption of more and more of that item falls over time






7. Product demand - productivity - prices of other resources - and complementary resources






8. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






9. Ed = 0 - no response to price change






10. Exists if a producer can produce a good at lower opportunity cost than all other producers






11. The output where ATC is minimized and economic profit is zero






12. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






13. Ed = 1






14. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






15. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






16. The total quantity - or total output of a good produced at each quantity of labor employed






17. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






18. Costs that change with the level of output. If output is zero - so are TVCs.






19. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






20. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






21. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






22. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






23. The ability to set the price above the perfectly competitive level






24. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






25. The imbalance between limited productive resources and unlimited human wants






26. The sum of consumer surplus and producer surplus






27. A good for which higher income increases demand






28. The mechanism for combining production resources - with existing technology - into finished goods and services






29. The change in quantity demanded resulting from a change in the price of one good relative to other goods






30. Ei > 1






31. Entry (or exit) of firms does not shift the cost curves of firms in the industry






32. When firms focus their resources on production of goods for which they have comparative advantage






33. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






34. Models where firms agree to mutually improve their situation






35. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






36. Ed = (%dQd)/(%dP). Ignore negative sign






37. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






38. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






39. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






40. The practice of selling essentially the same good to different groups of consumers at different prices






41. The difference between total revenue and total explicit costs






42. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






43. 0 < Ei < 1






44. Entry of new firms shifts the cost curves for all firms downward






45. Exists if a producer can produce more of a good than all other producers






46. A firm that has market power in the factor market (a wage-setter)






47. AVC = TVC/Q






48. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






49. The additional cost incurred from the consumption of the next unit of a good or a service






50. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good